End call: Over 10k subscribers quit BPL in 2 months

MUMBAI: Essar has initiated the process to sell BPL Mobile and has also issued a termination notice to JV partner Hutchison. Over 10,300 subscribers in Mumbai have opted out of BPL in the past two months. Hutch is the largest player in Mumbai with over 2.1m users.

Reliance’s CDMA business has 1.8m, Bharti has 1.4m and BPL 1.3m. Essar served a termination notice to Hutchison late on Monday night, ending months of speculation over the future of what could have been the first intra-circle merger in India. “The termination notice has been issued by Essar.

The share purchase agreement signed between BPL Mobile and Hutchison Essar was conditional on the parties receiving DoT approvals by July 31. Since the approvals were not received until this date, the purchase was not completed and the agreement has been terminated,” sources told ET.

The original deadline for the merger was June 30. It was later extended to July 31. The agreement between Essar and Hutchison, entered at the time of buying BPL’s nation-wide cellular business, had a provision giving both parties the right to terminate the deal.

“As per the agreement, either of the parties could terminate the contract. Essar has done it because the merger was not moving forward, hurting the growth of BPL in Mumbai,” said sources. Essar would not like to continue with the Mumbai circle for long as a single circle operation isn’t feasible in the fiercely competitive Indian telecom market.

“They (Essar) will have to sell this to some operator because there’s no business case in retaining just one circle,” an industry analyst said. Hutchison paid Essar for the three circles (Kerala, Tamil Nadu and Maharashtra) after they were merged in January this year. Some deposit money was also paid by Hutchison to Essar ahead of the Mumbai circle’s merger.

“However, this deposit money will have to be returned by Essar as the merger in Mumbai is not taking place,” sources said. The deposit amount could not be ascertained. Industry observers said not getting DoT clearances could be the immediate cause of the deal collapse.

However, differences had been brewing between the two JV partners for a long time. While Essar wanted a greater say in the company’s matters, Hutchison was taking actions without adequately consulting the group, said sources. Unhappy with the equity sale by Hutchison Telecom International to Egypt’s Orascom, Essar had also written letters to the Prime Minister’s Office (PMO), DoT and the defence ministry, raising security concerns.

Hutchison Essar had earlier entered a purchase agreement with Aircel, also conditional on the receipt of government approvals under the intra circle merger guidelines. That deal was called off as approvals were not received. Aircel was later bought by Malaysia’s Maxis.

(This article was originally published in The Times of India)

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